Publications > Franchising your business in Australia

 

December 2011

 

Introduction

Franchising if done properly is a great way to expand your business without you having to inject the relatively large amounts of capital required if you decided to expand by yourself. Essentially franchising your business requires you form an agreement with a franchisee where in return for you providing the “know how” and marketing, the franchisee agrees to sell your product or service. The agreement term is usually for three to four years, but may only be for one year.

 

Franchising your business While there are other considerations when franchising your business (For general information on franchising your business click here) legally you will need to consult with a solicitor to:

• draft an appropriate franchise agreement;
• protect your intellectual property;
• determine your Occupational Health and Safety requirements; and
• determine the effect of the legal obligations imposed by the Franchising Code on you and your franchise.

 

Your Franchise Agreement :

A franchise agreement is a legal contract that defines the rights and obligations of you and your franchisee, and your relationship with them. In order to protect the quality of the service or products to be provided or sold by the franchisee to the consumer the agreement should also include the standards and method by which these standards are enforced. Further to ensure that you are complying with the Franchising Code of Conduct (see below) this agreement should be reviewed and drafted by a solicitor.

 

Protecting your intellectual property:

As your intellectual property (brand name, trade mark, business method and unique business idea) is likely the basis for your franchise you need to ensure IP is properly protected. Further, in licensing your intellectual property to the franchisee you will need to develop clear guidelines for its terms of use in your franchise agreement.

 

Occupational Health and Safety:

As a franchisor, you have Occupational Health and Safety obligations to your franchisees. As part of this obligation, your franchise agreement needs to compliant and ensure the safety of all people involved in the franchise.

 

The Franchising Code

The Franchising Code essentially sets out

• your rights
• your obligations
• the information you must disclose to franchisees
• the elements a franchise agreement must contain
• a mediation procedure for disputes.

 

The Franchising Code is administered and enforced by the Australian Competition and Consumer Commission (ACCC) and also provides information for small business’s operating a franchise, or extending or renewing a franchise agreement.

 

Amendments to the Franchising Code

The Franchising Code was extensively amended in 2010 and these amendments now apply to any franchise agreement created, renewed, transferred or extended on or after 1 July 2010.

 

For information on these amendments and how they may affect you click here.

 

For more information on Franchising your business in Australia please contact Gavin McInnes on 3009 8444 or r g.mcinnes@rostroncarlyle.com.

 

"The information contained in this article is general in nature and cannot be regarded as anything more than general comment. Readers of this article should not act on the basis of this comment without consulting one of Rostron Carlyle's legal practitioners who will consider their particular circumstances".

 

Expertise

 

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